Correlation Between ESCO Technologies and Itron

Can any of the company-specific risk be diversified away by investing in both ESCO Technologies and Itron at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ESCO Technologies and Itron into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ESCO Technologies and Itron Inc, you can compare the effects of market volatilities on ESCO Technologies and Itron and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ESCO Technologies with a short position of Itron. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and Itron.

Diversification Opportunities for ESCO Technologies and Itron

-0.47

Correlation Coefficient

ESCO Technologies  Itron

Very good diversification

The 3 months correlation between ESCO and Itron is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Itron Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itron Inc and ESCO Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ESCO Technologies are associated (or correlated) with Itron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itron Inc has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Itron go up and down completely randomly.

Pair Corralation between ESCO Technologies and Itron

Considering the 90-day investment horizon ESCO Technologies is expected to generate 1.4 times more return on investment than Itron. However, ESCO Technologies is 1.4 times more volatile than Itron Inc. It trades about 0.11 of its potential returns per unit of risk. Itron Inc is currently generating about -0.02 per unit of risk. If you would invest  13,447  in ESCO Technologies on December 27, 2024 and sell it today you would earn a total of  2,591  from holding ESCO Technologies or generate 19.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

ESCO Technologies  vs.  Itron Inc

ESCO Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ESCO Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Itron Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Itron Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Itron is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ESCO Technologies and Itron

The main advantage of trading using opposite ESCO Technologies and Itron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESCO Technologies position performs unexpectedly, Itron can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Itron will offset losses from the drop in Itron's long position.

The idea behind ESCO Technologies and Itron Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.